New employment data from Paychex and IHS Markit highlights continued wage growth amid a tight labor market.
- Weekly earnings grew for the 13th consecutive month, reaching 3.59% growth in January, partially thanks to weekly hours worked increasing by 0.83% from last year.
- Small business employment growth remains flat, with the national jobs index increasing in January by just 0.01% to reach 98.18%.
- The South is one of the top regions for SMB employment growth.
If you're a small business owner struggling to find qualified employees, you're experiencing the results of a continually tight labor market. According to newly released job and wage figures, business owners throughout the country have experienced some repercussions stemming from the labor market since mid-2019.
Earlier today, Paychex and IHS Markit released their latest Small Business Employment Watch, which examines ongoing employment and wage trends that they say serve as an "important indicator of the health and direction of the overall economy."
With small businesses representing more than 90% of the American economy and the 2020 election looming in the coming months, Paychex President and CEO Martin Mucci said this latest batch of data highlights a wage and job growth model that business owners can expect to continue seeing this year.
"With election season heating up and the economy top of mind for business owners, this month's Small Business Employment Watch demonstrates the continuing stability of jobs growth recently, as well as weekly earnings improvement," he said. "The data shows consistent employment growth and yet another month of encouraging wage growth, two key indicators that the economy is off to a solid start in 2020."
National and regional job indexes remain stable
As the calendar switched over to a new year, researchers found that small business employment growth remained relatively the same in January. According to the data, the national jobs index saw a stable hiring trend over the last two quarters.
With the overall job market seeing a 0.01% increase in January, researchers said overall market growth saw very little change in job gains at 98.18%. At that figure, the national jobs index shows an 0.04% increase from the previous quarter and a 0.76% decrease from last year.
Since the job market has remained largely flat as of last month, James Diffley, chief regional economist at IHS Markit, said small business owners should expect to continue experiencing the effects of a tight labor market.
Breaking down the country into four regions, researchers found that the Northeastern portion of the U.S. reported its first positive year-over-year jobs growth in almost three years at 98.01. A 2.6% uptick in jobs in the region's leisure and hospitality sector is a major contributor to that growth.
However, the South remained the strongest in job growth at 99.13%, with a 0.26% bump last month. Conversely, the West saw an employment figure decline of about 0.69%, making it "the weakest region for small business job gains."
Wages continue to grow
In a largely stagnant job market, small business owners are shelling out more money on wages. According to the data from Paychex and IHS Markit, weekly wage earnings growth grew for the 13th consecutive month, landing at 3.59% last month. This latest increase raised the average hourly earnings in January to $27.59, marking a yearly increase of 77 cents (or approximately 2.89%).
While those numbers are encouraging for the overall economy, the actual hourly earnings growth falls below the 3% mark to start the new year. The hourly earnings' downward trend is even more noticeable if compared in one- and three-month annualized data sets. According to the data, the one-month annualized data showed a decrease from 2.49% to 1.96%, while the three-month figure went from 3.03% to 2.4%.
The West continued to lead in hourly earnings and hours worked, with last month's $29.22 hourly figure marking the 12th consecutive month of increases. Its weekly earnings rose to 4.35% last month.
Weekly earnings are also up in the Midwest, where those figures rose to 2.1% last month from January 2019's 1.97%. According to the data, small business owners paid their employees an average of $836.15 per week. When it comes to hours worked, the Midwest saw a year-over-year increase of 0.56%, reaching an average of 32.11 hours worked per week.